Several issues concerning the trial of company litigation cases

       Company law judicial thinking -- the implementation of the revised

                     Authors: Li GuoguangWang Chuang

Four, company shareholder litigation system

 

 Shareholder litigation is an important part of corporate law system, according to different litigation, shareholder litigation is divided into two kinds: one kind is purely in order to maintain their own legitimate interests of shareholders and to lift the company or other people's litigation that the direct action; another is the indirect litigation and litigation to protect the interests of the company. The revised Company Law Article twenty-second, article 152nd, article 153rd, respectively specified the shareholders limited liability company and Limited by Share Ltd, and shareholder litigation system to shareholder direct action and shareholder direct litigation, as the basic content of the comprehensive start, it is necessary to perfect the legitimate rights and interests of the shareholders and the public interest protection system. In view of the present actual conditions of our country, should encourage shareholders to exercise the right to appeal, a pressing matter of the moment is to solve the following three problems:

 

 (a) shareholder litigation eligible parties

 

 1, the qualified plaintiff problem. Shareholder identity is a necessary condition for shareholders to exercise their right to appeal. Article 153rd of the company law, the provisions of the revised, direct litigation the plaintiff can be any shareholder of the company and the company; in the first paragraph 152nd of the indirect litigation as a plaintiff shareholders make holding period and ownership restrictions, namely indirect litigation the plaintiff must be shareholder, Limited by Share Ltd limited liability company for more than 180 days alone or in together hold one percent or more shares of the company. Make appropriate restrictions on the plaintiff qualification of the reason is that: although indirect litigation is an effective way to safeguard their own rights and interests of small shareholders, but because of the contradiction between shareholders disagreement or shareholders of local interest and the overall interests of the company and other factors, may cause unnecessary litigation burden. In order to maintain the normal operation of the company, it is necessary to hold a deadline to the plaintiff shareholders and shareholding limits. Among them, limit the shareholding period, to prevent the abuse of representative litigation system and the purchase or transfer of the shares; on the proportion of shareholding requirements, to ensure the plaintiff shareholder representative lawsuit filed with a certain degree of indirect.

 

 2, the defendant problem. In direct action, according to the provisions of the company law revised in paragraph 153rd, direct action directors, supervisors, the formation of personal behavior of senior management personnel in performing their duties in violation of laws, administrative regulations or the company's articles of association, the individual as the defendant. According to the provisions of the company law in twenty-second, shareholders, the general meeting of shareholders, board of directors, voting procedure procedural flaws or the resolution is in violation of laws, administrative regulations of the occasion, because the subject of tort has become the company, so the company should be the direct defendant.

 

 In the indirect action, in order to protect the legitimate rights and interests of shareholders, the second and third paragraphs of this article 152nd provisions of the company law of the indirect lawsuit defendant relatively broad, including company directors, supervisors, controlling shareholders, including senior management personnel within the company, including the third person outside the company. Such provisions, as appropriate. Indirect action since the shareholder representative litigation, then the right belongs to the company, in accordance with legal procedures and conditions, right of shareholders can exercise the company on behalf of the company. This can not only prevent and remedy the organs of company staff abuse of power, but also can prevent and eliminate infringement of third people to the company.

 

 3, the legal status of the company and other shareholders. In the indirect lawsuit, the legal status of the company and other shareholders is a cause for concern and consider the problem. Embodied: other shareholders may participate in the suit? Does the company must participate in the proceedings? If the company to participate in the proceedings, the legal status of?

 Then filed shareholder indirect litigation, and litigation and the other shareholders' interests are closely related, other shareholders in the indirect lawsuit and the plaintiff shareholder in the same position position naturally become an important problem of indirect litigation system, but the revised Company Law on this not clearly stipulated. Indirect shareholder litigation in the American, other shareholders without charge equal to group action in the group members. The law does not prohibit the other shareholders to participate in the litigation, but in group litigation rules, by the judge in the consideration of the cost and efficiency of litigation cases, decide whether to allow the other shareholders to participate in the proceedings; but when the application procedure in the interests of the applicant has by now give the parties represented, are not allowed to participate in the proceedings. Indirect shareholder litigation in Japan, the plaintiff shareholders by the prosecution, other shareholders shall not on the same subject matter of litigation and litigation, but in order to prevent the plaintiff and the defendant director conspiracy intentionally lost profits from the Japanese commercial code, "" 268th section second allows other shareholders to participate in the shareholder lawsuit. However, because of the delays in the proceedings in the court or not properly heavier burden significantly, the limit. Our shareholder indirect procedure, we think, before the first hearing, if there are other shareholders to participate in the shareholder's representative action, shall be permitted, because this can make shareholder representative litigation risk sharing, the plaintiff, also help to find out the facts. After the first trial, the court should not normally be allowed to join the lawsuit because of other shareholders, shareholders indirectly result relates to the plaintiff shareholders and other shareholders of public interests litigation, and the other shareholders have the res judicata, among all the shareholders of the company is not necessary joint litigants, other shareholders of the company whether to participate in the litigation does not affect the trial of the case. So, the people's court should not take the initiative to put it as a co plaintiff, nor it is listed as the third party without independent claim, to avoid increased procedure time unreasonable delay or litigation cost.

 

 In the shareholder direct litigation, shareholder litigation of subrogation by the company, whether the company will participate in the lawsuit? We believe that, due to indirect shareholder litigation representative and subrogation, in fact the plaintiff shareholders is the company's right of action, so there is no necessary to participate in the litigation of company. But in view of the quality of autonomy of civil litigation by the company independently, can choose whether to participate in the indirect lawsuit. In addition, in emphasizing the autonomy at the same time, can not damage the public interests; if the indirect action if no company participation, will not be able to identify the facts of the case or the plaintiff and the defendant malicious damage to the interests of corporation and other shareholders, company should participate in the proceedings.

 

 The next question is: company in indirect action, what is the position in the litigation? In this regard, Public opinions are divergent. The viewpoint thinks, the company shall as the plaintiff; the viewpoint thinks, company should be no independent right of claim third; also the viewpoint thinks, the company shall as a new type of third people; and view, status and subrogation of company creditor legal relations in the exercise by subrogation the status of similar. We think, for the status of the company in the indirect shareholder litigation in the can not simply copy the current party system to be defined, its status is comprehensive in nature, should be based on the actual situation to define the litigation status.

 

 First, the company may be in the form of. For example, pre procedure in the indirect litigation, the plaintiff shareholders to prove existence of litigation and litigation of company shall reject reason, this company is in the position of the form. Secondly, the company can be substantial plaintiff. Shareholders on behalf of the company after the people's court proceedings, the judge natural binding on the company; win interests also belong to the company, company is real interests and ownership. Once again, the company can be third people. If we consider the indirect lawsuit has been conducted, the plaintiff and the defendant malicious damage to the interests of the company, can take the initiative to apply to join the action of nature. At the same time, the company in the third position; but in view of the company to participate in the litigation has not proposed independent litigation request, to participate in its proceedings is only in order to prevent litigation arising from the bad results, so it belongs to the third party without independent claim. Finally, the company can be a witness. To mention the indirect lawsuit in the shareholder, the company did not participate in the litigation; but if the people's court think, companies not to participate in the litigation will lead to the facts of the case can not be identified and may harm the public interest, may notify the company to participate in the proceedings. At this point, the company's rights and obligations is to provide evidence to the court, the lawsuit status similar to witness. Thus, "the company has legal status is quite complex in the shareholder direct litigation, but regardless of the form or substance is the plaintiff, or whether it is third or witness, is not the full sense of the parties, the local position only if the parties". The company may raise objections to the plaintiff's claim or action, request the court to review, but can't put forward new claims, cannot request to withdraw, cannot request reconciliation, no right of appeal, at the same time the company itself must be neutral, not inclined to any party. In this sense, we think, litigation independent shareholder indirect action in the company can have a style of one's own party.

 

 (two) indirect shareholder litigation jurisdiction

 

 Which court has the jurisdiction to indirect shareholder lawsuit, is an important problem in indirect shareholder litigation. Jurisdiction of indirect shareholder litigation of the Civil Procedure Law of our country does not set the plaintext. We think, the essence of the plaintiff shareholders indirectly is shareholder's company, just because the company failed to or refuse to bring a lawsuit by the shareholder representative lawsuit; therefore, the board of supervisors, the board of supervisors, the board of directors, executive director, responsible for breach of contract or tort obligation company, as a creditor of the company shall be to which the courts, indirect shareholder litigation in the plaintiff should be to which the courts. This can keep the coordination between indirect shareholder litigation system and civil law system, but also can fully reflect the shareholder indirect litigation plaintiff is the real spirit of the company. In addition, the shareholders to pursue the liability of directors to indirect litigation, according to the principle of contract disputes or territorial jurisdiction of cyberspace tort disputes, can also be under the jurisdiction of the people's court at the domicile of the company.

 

 (three) the distribution of burden of proof in the shareholder direct litigation

 

 In the general management at the edge of shareholders, the company management and decision-making situations are not the grasp of the situation, should stick to the facts of the case, by understanding the real master and control the key evidence of the party the burden of proof. The specific distribution, the plaintiff shareholders to deal with facts, violations have the burden of proof; there is no causal relationship between the company, directors, supervisors and senior management personnel shall provide evidence of harm behavior does not exist or damage behavior and the harm, or to bear the consequences of losing.

 

 (four) pre procedure and judicial review indirect shareholder litigation

 

 Shareholders have the qualification of plaintiff bring indirect litigation, is not equal to the shareholders can be directly represented the company sued the company suffered unfair behavior damage. Prerequisite for shareholders to mention the indirect lawsuit is the company refuses or fails to bring a lawsuit directly to the implementation by his improper behavior of the parties, whether the company should not seek shareholder lawsuit behavior meaning, should not and can not to mention the indirect lawsuit. Only the shareholders request the board of supervisors, the board of directors to take the necessary measures to exercise the company litigation request, but the company refused to shareholders to ignore or shareholders, shareholders filed a lawsuit to. Exhaustion of internal remedies this is company law countries often set "" (exhaustion of intra corporate remedies) rules, also known as pre request rules (the demand rule). Its legal principle is: the company is a legal person shareholders and relatively independent of company, shareholders exercise their right to appeal, must maximum respect for the company's legal personality; at the same time, this method of "exhaustion of Internal Remedies" can give the company to check their behavior of the opportunity, if the company management to shareholders prosecution request, the company has the opportunity and plaintiffs settled in formally charged before. Article 152nd of the company law revised that set out the rules, in which shareholders before instituting the indirect lawsuit, should request the board of supervisors or not set up the board of supervisors of a limited liability company or the board of directors or supervisors, no executive directors of the board of directors to the people's court. If the request can not be met, the company have no reasonable reason but ultimately refuses or neglects to bring, shareholders may bring a lawsuit on behalf of. But in such as the relevant property is about to be transferred, the exercise of rights or the limitation of action is more than during emergency situations, shareholders have the right to initiate proceedings on behalf of immediately. Visible, pre program settings to reduce unnecessary litigation, but also can make the company filed a lawsuit, to avoid the abuse of litigation.

 

 

 To be fully general principle of civil procedure, the plaintiff may dispose of their rights, and the reconciliation. The entity to solve the problem of indirect shareholder litigation through settlement way, is in line with the principle of litigation economy; however, indirect shareholder litigation reconciliation with the general civil reconciliation is not the same, because be on behalf of shareholders interests are possible with indirect action in the interests of the company occurred conflict, if the plaintiff shareholder in the indirect action and the defendant reached a settlement or automatic withdrawal, which is not the legitimate interests of individuals in the proceedings (for example by the company bought the stock), system objective is completely deviated from the indirect action. In view of this, in order to prevent the abuse of litigious right and damage the interests of the company, to ensure that the contents of the settlement of fairness and rationality, the people's court shall not damage the interests of the company and other shareholders as the standard, strictly examine the shareholder and the company signed the settlement agreement or withdrawal request. Without the court approval of the settlement agreement or withdrawal were not binding. Future corporate can still indirect action in the same facts and reasons directly filed a lawsuit to the people's court, or other shareholders of the company based on the same facts and reasons to indirect action. The people's court "in the review of the settlement agreement, agreed to pay for the losses of the company shall be the amount shall be paid in proportion to the amount of shareholders, the possibility of winning the case and the defendant in the solvency of the company and other factors into account agreement. A number of people's court thinks, the settlement agreement clearly against the interests of the company and other shareholders, a serious violation of the principle of good faith and public order and good custom, has the right to deny the reconciliation agreement effectiveness "(Liu Junhai:" shareholder representative lawsuit right comparative study ", contained in the" China civil trial "total volume first, ninety-sixth pages). At the same time, the plaintiff shall notify the company and content, and the effect of the other shareholders to notice or announcement. Other shareholders objected to reconciliation, the court's permission, can provide evidence to the people's court for revocation of reconciliation and.

 

 

 (five) the shareholder lawsuit expense guarantee

 

 

 Shareholder litigation system is to safeguard the interests of the shareholders for the creation of a system, but the system may abuse of litigious right to interfere with the operation of the company indirectly and in the operation process, the company struggled to cope with the. In order to prevent shareholders abuse of litigious right, the plaintiff shareholders have an ulterior motive to prevent some malicious prosecutions, company law article twenty-second paragraph third of the revised provisions of the cost guarantee system, namely the shareholders by shareholders or the general meeting of shareholders, board of directors meeting convening, voting in violation of laws, regulations or the company's articles of association, or the resolution is in violation of the articles of association of the company but when the litigate, the people's court may, at the request of the company, require the shareholder to provide a corresponding guarantee. Although the warranty system aims to prevent shareholders abuse of litigation, but it also has some side effects, namely, the defendant may cost guarantee as a means to prevent the plaintiff shareholder lawsuits. Therefore, the clause's use of the word is "yes", instead of "should", which means that the people's court to grant the right of discretion, the people's court judge and decide whether to require the plaintiff shareholders provide security. We believe that, in the specific operation, if the defendant can prove the plaintiff shareholder lawsuit filed with malice, or lack of a reasonable possibility for the company or the company's shareholders to benefit, or no value of the situation, the people's court may require the plaintiff deposit deposit or provision of a corresponding guarantee

 

Editor's note:

 

      Associate Company is an important force to promote the economic development of modern society, but it also has some negative effects, in the security market of our country, many listing Corporation use related party transactions to cosmetic results, manipulation of profits, to circumvent the law or evade debts, seriously hinder the healthy development of this market; in judicial practice, legal issues the deadlock the increasingly prominent, has become an unavoidable problem in judicial work. Therefore, to regulate the related transactions of corporate deadlock and judicial relief, become the focus of attention of the amendment of company law.

The problem of related party transactions five, Associate Company

 

 Associate Company is the inevitable product of the company system development. Associated parties through property, production and marketing of such relations, optimize the allocation of internal resources, improve the profitability of assets; through mutual borrow funds, mutual guarantee financing, timely, effectively grasp the investment opportunities, improve the operational efficiency of funds; therefore, the Associate Company has become the driving force of modern economic and social development. However, the Associate Company has some negative effects on social economy, China's Associate Company generally using Hypotaxis company's independent personality, through illegal related transactions, infringing the Hypotaxis company and its minority shareholders and creditors etc.. In the security market of our country, many listing Corporation use related party transactions to cosmetic results, manipulation of profits, to circumvent the law or evasion of debt, has seriously hampered the healthy development of China's capital market, and finally from the market economic rules, damage the Hypotaxis company and its shareholders and creditors. Therefore, regulating related transactions become the focus of the company law and securities law concerned.

 

 Some listing Corporation shareholders, actual controllers, directors, supervisors, senior managers and other people through the parallel transaction "tunneling" company, against the company, company of medium and small shareholders and creditors' interests, the revised Company Law Article twenty-first, article 125th, article 217th, by definition, relationship involves four aspects of limited liability company or Limited by Share Ltd uses the relationship between occupation of the interests of the company and the liability and the listing Corporation board relates to correlation program control on the related transactions to be regulated, which regulate the listing Corporation governance structure, legal obligation strictly listing Corporation and its relevant personnel, has the vital significance to promote the development of capital market stability the.

 

 In the people's court in the case of related party transactions, because of the legislative gaps, so hearing difficulty, many blind spots appear in the execution, still need further exploration. Among them, how to confirm the illegal transactions is to hear cases involving transactions starting point and key. The revised Company Law twenty-first stipulates: "the company's controlling shareholder, actual controller, director, supervisor, senior management personnel shall not use its relationship to damage the interests of the company." This provision establishes the legal basis and principles of regulation of the related party transactions, the specific operation method according to the need of the practice, the judicial interpretation and further clear. Among them, "the association" and "damage the interests of the company", is that two basic standards of illegal transactions. According to the judicial practice, and verification of the market economy in developed countries, the two basic standards embodies the following elements.

 

 (a) transaction

 

 Connected transaction refers to a company's internal, and other interested parties, to business decision-making can directly or indirectly control or influence. The internal relationship is controlling relationship and great affect relations, external performance for the parent company, control of the company, holding company, joint stock company, group, company, enterprise or other forms of group Multi-National Corporation. Connected transaction includes natural person and legal person association association two, the company's board of directors and other senior management personnel as the representative, the latter to the parent company or holding company as the representative. Article twenty-first of the company law revised the transactions were defined as the controlling shareholders, actual controllers, directors, supervisors, and senior managers of natural person and its direct control or indirect control of enterprise legal persons, and the controlling shareholder, actual controller, senior management personnel and the relationship in the 217th article defines.

 

 A related enterprises and the specific scope, the relevant administrative regulations and rules of China has made a clear definition. "The people's Republic of China Law of tax collection and the detailed rules for the implementation of" the thirty-sixth regulation, related enterprises refers to the capital, business sales, there are directly or indirectly owned or controlled, directly or indirectly with the third party ownership or control, other have associated relations in the interests of the company, enterprise, other economic organizations. The State Administration of Taxation issued in May 20, 1998 the "business dealings between associated enterprises tax management rules (Trial)" the provisions of article fourth, related enterprises mainly includes: 1 each other directly or indirectly holds shares of the total party reached 25% or more; 2 directly or indirectly with owned by third or control shares reached 25% or the above; between 3 enterprises and other enterprises credit funds of enterprises accounted for 50% or more of the total funds, borrowing or enterprise 10% is the guarantee of another enterprise; 4 enterprise directors or managers and other senior staff more than half or a managing director is appointed by the other enterprises; 5 enterprises production operational activities must be provided by another business franchise rights (including industrial property rights and proprietary technology, etc.) to normal; 6 the production and operation of enterprises purchase raw material, parts and accessories (including the price and trading conditions) by another enterprise or supply; 7 enterprises in the production of products or sales of goods (including prices and trading conditions) is controlled by another company; 8 to the production and operation of enterprises, trade relations with other interests on the actual control associated , including family, kinship etc.. Notably, the provisions of January 1, 1998 implementation of the Shanghai and Shenzhen two "Listing Rules" section second "should be the immediate disclosure of related party transactions", including the processing of transactions, the principle of relevance, avoidance measures, the board of directors on the affiliated transaction of the report and announcement obligation, related party transactions exempt from disclosure, not as for related transactions and transactions interim report content, is by far the most complete regulations on affiliated transaction in china. In this section, correlation artificially divided affiliated legal persons and persons associated, and a detailed list, and has expanded the scope of the provisions of.

 

 (two) the transaction motive

 

 Related party transactions directly relates to the interests of the association, the transactions will inevitably exist for gain and violation of duty of loyalty and obligation and damage the interests of the company. Of course, some related people may also use the master information convenient, convenient and effective to facilitate business objective, so as to achieve win-win mutual benefit "". Therefore, the people's court shall examine whether the purpose of legitimate transactions, transaction motive for such as market manipulation, transfer of profits or property, false statements, tax evasion and other malicious, is very important to judge the validity of related party transactions.

 

 (three) transactions

 

 Association of company law the regulation mainly refers to the non routine transactions related transactions in the transaction, namely the subject abuse of centralized management, the dispersed ownership or in fact control force on the company, related party transactions engaged in damage to the interests of the company. This behavior is usually between the Associate Company on the benefit, cost, cost and profit and loss spreading meter unreasonable or unfair. Common types are: sales or transaction price of commodities or stocks between Associate Company, significantly lower than the international or domestic market normal and reasonable price; Associate Company between financing and not charge interest; between the Associate Company loan money, obviously lower than the financing cost of interest rate of interest received. Is the main problem in practice, how to identify the transaction behavior whether to belong to non trading behavior of conventional, how to evaluate the transaction price, what procedures need to fulfill. Without a fair, scientific assessment mechanism, allowing the parties to the transaction itself out of an intermediary gave the results they need, is bound to harm the interests of the company and creditors. Therefore, the people's court shall refer to the market trading practices, and expert opinion audit, assessment of professional organizations.

 

 (four) the trading results

 

 Trade related transactions people should bring real or apparent possible loss to the company.

 

 Needs to be pointed out is, the director of the listing Corporation and its direct control or indirect control enterprise is not completely can not trade. According to the revised company law the 125th regulation, the directors of the listing Corporation as long as the avoidance of affiliated enterprise, the right and the meetings of the board of directors resolutions related to exercise the right to vote, do not represent the directors to exercise the voting right; the meeting of the board of directors is not permitted to attend the board of directors held, the meeting of the board of directors by resolution by unrelated directors by number; no relationship with more than three people attended the board of directors of the listing Corporation, the matter by the general meeting of shareholders. In this case, the directors of the listing Corporation and between direct control or indirect control of the business transactions shall be legal protection. Otherwise, the transaction is invalid, led to the company suffered losses, it shall bear the liability for compensation.

 

Six of corporate deadlock, judicial relief

 

 In judicial practice, the legal issues of corporate deadlock has become increasingly prominent, has become the realistic problem that can't be avoided in the civil trial practice. The so-called corporate deadlock (deadlock), refers to the company in the existing operation because of shareholders, directors of intense contradictions or disputes between each other, and not compromising deadlocked situation, leading to the shareholders' meeting, board of directors and other power and decision-making authority in the rights of confrontation and not in accordance with the legal procedures, to make decisions, so that the company cannot normal operation the fact that state, even paralysis. Before the revision of the company law, because of the absence of system of company law and lack of judicial idea, the people's court in the treatment of corporate deadlock in in a dilemma, a "stalemate".

 

 (a) the reason and harm of corporation deadlock

 

 Modern Corporation law must emphasize the maintenance of external creditors, consumers and other legitimate rights and interests, but also to maintain the economic democracy and a balance of interests within the company. The surface reason of corporate deadlock formation is mainly between shareholders or directors of contradictions and conflicts, institutional arrangement deep reasons from the traditional limited company, is established in the capital on the basis of the existence of the company and the basic principle of operation includes capital democracy "majority rule" principle as well as the embodiment of the capital maintenance and fulfilling "the shareholder shall not take return to the investor" principle. As everyone knows, is a limited liability company human resources and company, the shareholders mutual has good cooperation and long-term stable cooperative relations are the important basis. The traditional company system and the principle of putting too much emphasis on the capital fixity, machinery to adhere to the three principles of the company capital and the majority principle, free movements don't allow companies to capital, but not allowed to break the internal power structure. Although this kind of institutional arrangement and capital first philosophy can maintain the stability of the company and the interests of creditors, but also restricts the reasonable flow of economic resources, especially the initiative and the lawful rights and interests of suppression of minority shareholders, such as internal and external transfer restricted shares, oppressed minority shareholders economic democracy, which prevents the require withdrawal and dissolution the company's rights. When the company capital factors and personal factors conflict, the former priority due to the institutional arrangement, which can easily lead to corporate deadlock.

 

 Company deadlock occurs, whether the company or the shareholders are very bad, in most cases, the shareholders constitute serious damage. Because shareholders between the parties have lost at least trust, mutual cooperation has completely broken down, so the control of the company, one party may directly against the interests of the other party. As the Usa Inc law scholar Robert W Hamilton said: "in the company deadlock, majority is likely to use various means to 'torture' minority, such as removal of paid positions they held, stopped paying dividends, let them wait for a year, so" (Zheng Taian, Du Yu: "'company the deadlock' shareholder's equity in relief", contained in the "social science research", 2004 third).

 

 From the practice of our company, in the company deadlock, usually there is a shareholders to other shareholders in fact forced and serious unfair, the original management company shareholders controlling company management and property, in fact deprived of the legitimate rights of the shareholders.

 

 (two) the company deadlock judicial remedies

 

 Before the revision of the company law, because of the lack of evidence in the company law, the people's court in front of many corporate deadlock often shown cautious attitude back, can accept, can support multiple claims have doubts about such cases, even holding should not entertain ideas. A popular view is that, as autonomous organizations of a private law, is composed by the shareholder and shareholder money making tools, the voting right of shareholder holds the "divine status in corporate governance". Regardless of the relief measures, the court in the essence of corporate deadlock are violations of shareholder autonomy rights; although the company deadlock due to management of paralysis and chaos caused the property of the company continued to wear and erosion, but justice on this "company Dutch act" still has no right to interfere with, company parties; and because the business go from bad to worse, a natural outcome of the final bankruptcy is the survival of the fittest market environment. In this regard, we believe that, although the viewpoint with respect to the company autonomy, but ignore the corporate social responsibility. Consideration of judicial intervention in corporation deadlock problem, its essence is the company law on compulsory national and private autonomy deep-seated problems. We ought to see such an important fact: the company deadlock continued not only harm the interests of the shareholders and the company itself, and the influence of all company rise and fall in external stakeholders. The accumulation of large amount of company deadlock will produce the debts of the company, the associated enterprises chain reaction, group conflicts even inspire employees, resulting in shock to the market and social stability. If the people's court shall not accept, is tantamount to put an end to the parties to obtain the legal relief way, the contradiction to the society, the results will enable a more intensified conflicts and may lead to new social conflicts.

 

   Therefore, for the company deadlock, the people's court shall bear the social responsibility from the perspective of the company, the company law only positive response from respect for private order to also pay attention to the public interest, from the emphasis on freedom of contract to the development trend of advocating moderate intervention, to the company deadlock in rapid intervention, so that the adverse effect of corporation deadlock is reduced to the minimum. In view of this, the 183rd article of company law revised special provisions to resolve the company deadlock judicial way: "because the company has serious difficulties in operation and management, its continued existence would make shareholders suffer great losses, cannot be solved by any other means, holding company shareholder vote more than ten percent of the shareholders, may request the people's court to dissolve the company, for the people" the company deadlock disputes remove legal obstacles.

 

 Although the revised Company Law provisions of the corporate deadlock in the shareholders lodge a company dissolution suit, the people's court to dissolve the company but by way of company deadlock, should be particularly careful. As long as the company is maintaining and existence of hope, the people's court should not easily judgment for dissolution of the company. Because the company as an independent economic entity, involve too many social relations, take on the aspects of social responsibility, not to allow individual shareholders by judicial hand free to destroy it. The judicial practice in the corporate deadlock, processing in procedure and entity, should especially pay attention to the following questions:

 

 First, the properness of the defendant. Because the deadlock disputes not only relates to the contradiction between shareholders, directors, and related to the corporate entity's survival, therefore, the people's court in the trial of the corporation deadlock cases, shall be the company and shareholders as a joint defendant list; the parties not listed, the people's court shall notify the plaintiff to the defendant the plaintiff refused additional; additional, to dismiss a prosecution.

 

 Second, the mediation is necessary procedure. In the company deadlock in the company of "human nature" crisis, should the mediation as a necessary procedure, in line with the principle of non dissolution measures first, as far as possible to mediate between the shareholders, directors, reconciliation or the necessary rectification of the company, such as order the company to amend its articles of Association, the company decided to withdraw or change etc.. For larger companies, after the dissolution of the company may have a larger social impact of the case, shall solicit the views of the parties on relevant issues, to coordinate the various contradictions, avoid the dissolution of the company and causing social instability. Allowing shareholders, trying to find and resolve conflicts may.

 

 Third, timely exercise of discretion and interpretation. In the case of corporate deadlock in case of disputes, the basic principle and the system of the people's court should abide by the company law, and combining the actual situation of our country existing company operation, appropriate reference experiences and practices of foreign effective alternative, in order to seek treatment as far as possible to the fair, reasonable, effective. In the trial process, should adhere to the principle of equity, timely exercise of discretion and interpretation right, to finally resolve the deadlock for the purpose, and actively take such as to inform the parties modify claims, contributed to the parties to provide relief, middle relief measures. For example, the plaintiff requests the withdrawal action, because of China's company law emphasizes the company capital three principles, limits the integration of human factors, the plaintiff is shareholder's withdrawal request will not like partners that freedom; therefore, the people's court at this time can tell the changes to the requirements for opposite party shareholder or the company acquired its stake, or request for dissolution of the company (Li Yongxiang, Zhang Fengxiang: "the company deadlock litigation in the analysis of problems", contained in the "China civil trial" total volume fourth, 158th pages).

 

 Fourth, according to the rectification system applicable to the company. Unable to reach agreement on the shareholder, can make the necessary rectification of the company, such as order the company to amend its articles of association, the company decided to withdraw or change etc.. At the same time to maximize shareholder exit mechanism, let "shareholder discrete" rather than "dissolution", to grace a shareholder of a transfer of shares at a reasonable price to the other party; or allow the objection to the shareholders request the other party to repurchase shares, in order to save the company's objective. If the implementation of such transfer or repurchase of the company into a leading company, the company shall be changed into a company. The revised company law second chapter of third has made it clear that one person limited liability company system.

 

 Fifth, the court compulsory dissolution. The people's courts accepted and heard in a company dissolution lawsuit, should focus on the review of three aspects: (1) the company deadlock exists. To prove the fact mentioned company dissolution litigation of shareholders: the company management difficulties and come to a deadlock, shareholder incapable of action to break the deadlock; corporate deadlock continued existence would make the shareholder and the company suffered irreparable loss. (2) whether or not to abuse the company deadlock clause. The people's court shall examine whether the shareholders "exhaustion of remedies and conditions", which cannot be solved by any other means of corporate deadlock; whether the holding company shareholder vote more than ten percent. (3) the company dissolution is necessary. With the dissolution of the company the way to break the deadlock, not only for the company and its shareholders, directors, costly, operating companies for many years to win the goodwill will be destroyed on one day, shareholders, directors have poured a lot of time and energy to all one's efforts wasted, and the dissolution of the company is bound to the company staff, produced or big or small, creditors consumers and other stakeholders. Therefore, the people's court in the trial of judicial dissolution of corporation by shareholders, should consider the public interest, for larger companies, after the dissolution of the company may have a larger social impact of the case, shall solicit the views of the parties on relevant issues, in order to find out the judgment for dissolution of the company is good for shareholders and members of the company, and do not harm the public interest the dissolution of the company, to avoid causing social instability.

Source: People's court